Term Sheet -- Monday, January 14

GOING DIRECT

Good morning, Term Sheet readers.

In case you missed it, Slack has decided to pursue a direct listing of its shares.

This could potentially make it the second big technology company after Spotify to bypass a traditional IPO. A direct listing is an unusual move in which a company circumvents the traditional underwriting process and allows the market to play a greater role in determining the price. The benefits are clear — no hefty underwriter fees and no lock-up period. But of course, the faster and cheaper route also comes with risks such as increased volatility.

Slack expects it could achieve a valuation well in excess of $7 billion, according to a report in The Wall Street Journal. “In Spotify’s case, the music-streaming company was expected to generate significant investor interest anyway, but there are questions around whether Slack has broad enough name recognition,” the article notes.

A company like Spotify fit the direct listing model well because 1) it did not need to raise any money as it would in a typical IPO and 2) it had a recognizable, global brand.

In March, I asked Spotify’s first investor, Northzone general partner Pär-Jörgen Pärson, whether he thought more unicorns would follow suit in pursuing the non-traditional IPO path. He said:

“I think it’s highly unlikely that a B2B company can go down this route. It’s just unlikely that a smaller market-cap company would be able to get enough interest in the capital markets. So for huge market cap, household names with cash-efficient models that don’t need to raise external capital, I absolutely think it could be a right fit. But there are very few companies who have all of those characteristics.”

This is why I was surprised to see that Slack, a B2B SaaS company, is pursuing the direct listing. It’s hard to know whether the direct listing model is a good one given there’s only been only one sole example of a company that made it work. Unicorns have to ask themselves whether the risk is worth the reward in this case.

• Vista Equity Partners Raises $1 Billion Over the Internet in a Month: Founded by iconoclastic chairman and chief executive Robert F. Smith, private equity technology specialist Vista Equity Partners ($46 billion raised since its launch in 2000) eschews placement agents and a traditional road show to raise $1 billion for an early-stage venture capital fund through a proprietary online process. By the end of the year rivals Silver Lake and Thoma Bravo follow suit.

• Carl Icahn Replaces the Management of Half a Dozen PE Funds: Octogenarian billionaire Carl Icahn becomes the first activist investor to target privately held partnerships. After purchasing stakes at steep discounts in the secondary market in six funds run by groups that haven’t raised a new vehicle in at least five years, Icahn wins no-fault divorce votes at all of them, with Icahn Enterprises appointed as general partner for the funds. Paul Singer of Elliott Management and Barry Rosenstein of Jana Partners launch similar campaigns. A new term is coined for private market activists: “zombie killers.”

• New York City Pension Funds Appoints the Yale Investment Office: Spurred by the American Council for Capital Formation’s 2018 report concluding that the $190 billion New York City Pension Funds’ underfunding crisis is the result of “politically motivated investment decisions and poor management,” the latter’s trustees strike a landmark outsourcing deal with the Yale Investment Office. Under the direction of chief investment officer David Swensen, the originator of the highly successful, alternatives-heavy “Endowment Model” of investing, Yale will invest 12 percent of New York City’s assets in the broad private equity class. The trustees announce they will gradually strike similar outsourcing deals with other LP-led investment organizations.

TO READ: The Jeff Bezos divorce has drummed up a lot of public interest around the background of his wife of 25 years. Here is an in-depth look into MacKenzie Bezos, a loyal ambassador for the company that made her and her husband the richest couple in the world. Read here.

TO CLARIFY: Term Sheet reported last week that ClassPass acquired GuavaPass for an amount that was based on media reports. Those reports were inaccurate, according to a ClassPass spokesperson, and the amount was actually $4.2 million.

• Immersive Labs, a cyber security skills platform, raised $8 million in Series A funding. Goldman Sachs led the round.

• Crossbeam, a Philadelphia-based collaborative data platform that helps companies find overlapping customers through data analytics, raised $3.35 million in seed funding. Uncork Capital and First Round Capital led the round, and were joined by investors including Village Global and Slack Fund.

• Bridge, a Chicago-based portfolio management software platform provider for RIAs, fiduciary financial advisors, and wealthtech companies, raised Series A funding of an undisclosed amount. FINTOP Capital and MissionOG led the round.

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PRIVATE EQUITY DEALS

• Vista Equity Partners acquired a majority stake in Quick Base, a software company that allows people without coding experience to build business applications. The deal is valued at more than $1 billion, according to the Wall Street Journal. Read more.

OTHER DEALS

• L’Occitane International SA agreed to buy Elemis, a U.K.-based beauty and skincare brand, for about $900 million.

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IPOs

• Kaleido Biosciences, a Lexington, Mass.-based Phase 2 biotech creating microbiome therapies for genetic disorders, filed for a $100 million IPO. It has yet to post revenue, and loss of $27.6 million in 2017. Flagship Pioneering (67.5% pre-offering) backs the firm. Goldman Sachs, J.P. Morgan, and Morgan Stanley are underwriters. It plans to list on the Nasdaq as “KLDO.” Read more.

• Cirius Therapeutics, a San Diego, Calif.-based maker of treatments for liver and metabolic diseases, filed for an $86 million IPO. It has yet to post a revenue, and posted loss of $18.3 million. Metabolic Solutions Development Company backs the firm. Citi and Credit Suisse are underwriters. It plans to list on the Nasdaq as “CSTX.” Read more.